Strategic Management ARMY 2015 Chp8
Strategic Management ARMY 2015 Chp8
Strategic Management ARMY 2015 Chp8
There is no perfect strategic decision. One always has to pay a price. One always has to balance
conflicting objectives, conflicting opinions, and conflicting priorities. The best strategic decision is
only an approximation and a risk. Peter Drucker
No business can do everything. Even if it has the money, it will never have enough
good people. It has to set priorities. The worst thing to do is a little bit of everything.
This makes sure that nothing is being accomplished. It is better to pick the wrong
priority than none at all. Peter Drucker
Source: Fred R.David, How Companies Define Their Mission, Long Range Planning 22, No. 3
(June 1988): 40
Perform
External Audit
Chapter 3
Develop Vision
and Mission
Statements
Chapter 2
Establish
Long-Term
Objectives
Chapter 5
Generate,
Evaluate, and
Select Strategies
Chapter 6
Implement
Strategies
Management
Issues
Chapter 7
Implement
Strategies
Marketing,
Finance,
Accounting,
R&D,
MIS Issues
Chapter 8
Measure
and
Evaluate
Performance
Chapter 9
Perform
Internal Audit
Chapter 4
Strategy Formulation
Strategy Implementation
Strategy
Evaluation
Consumers now shop for what they need and less for what the want. And they dont need much.
Essentials, such as food, health-care products, and beauty aids are selling, but even in those industries,
consumers are shifting to less costly brands and stores.
There is a need for marketers to convince consumers that their brand will make life easier or better.
Consumers now often wait until prices are slashed 75 percent or more to buy.
Consumers today are very cautious about how they spend their money. Gone are the days when retailers
could convince consumers to buy something they do not need.
Companies are shifting ad dollars from newspaper, magazine, and radio to online media.
Market segmentation can be defined as the subdividing of a market into distinct subsets of customers according to needs
and buying habits.
Market segmentation is an important variable in strategy implementation for three reasons:
1) Strategies such as market development, product development, market penetration, and diversification require increased
sales through new markets and products. To implement these strategies successfully, new or improved market
segmentation approaches are required.
2) Market segmentation allows a firm to operate with limited resources because mass production, mass distribution, and
mass advertising are not required.
3) Market segmentation decisions directly affect marketing mix variables.
Product
Price
Place
Promotion
Quality
Features & options
Style
Brand name
Packaging
Product line
Warranty
Service level
Other services
Level
Discounts &
allowances
Payment terms
Others
Distribution channels
Distribution coverage
Outlet location
Sales territories
Inventory levels &
locations
Transportation
carriers
Advertising
Personal selling
Sales promotion
Publicity
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1)
2)
3)
4)
Perhaps the most dramatic new market-segmentation strategy is the targeting of regional tastes.
Geographic and demographic bases for segmenting markets are the most commonly employed.
Alternative bases for market segmentation:
Geographic: region, county size, city size, density, climate
Demographic: age, gender, family size, family life cycle, income, occupation, education, religion, race, nationality
Psychographic: Social class, personality
Behavioral: use occasion, benefits sought, user status, usage rate, loyalty status, readiness stage, attitude toward product
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After markets have segmented so that the firm can target particular customer groups, the next step is to
find out what customers want and expect. This takes analysis and research.
A severe mistake is to assume the firms knows what customers want and expect. What the customer
believes is good service is paramount, not what the producer believes service should be.
Identifying target customers to focus marketing efforts on sets the stage for deciding how to meet the needs
and wants of particular customer groups. Product positioning is widely used for this purpose.
Product positioning entails developing schematic representations that reflect how
your products or services compare to competitors on dimensions most important
to success in the industry.
Steps in product positioning:
1) Select key criteria that effectively differentiate products or services in the industry.
2) Diagram a two-dimensional product-positioning map with specified criteria on
each axis.
3) Plot major competitors products or services in the resultant four-quadrant matrix.
4) Identify areas in the positioning map where the companys products or services
could be most competitive in the given target market. Look for vacant areas
(niches).
5) Develop a marketing plan to position the companys products or services
appropriately.
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Some rules for using product positioning as a strategy implementation tool are:
1) Look for the hole or vacant niche. The best strategic opportunity might be an
unserved segment.
2) Dont serve two segments with the same strategy. Usually, a strategy successful
with one segment cannot be directly transferred to another segment.
3) Dont position yourself in the middle of the map. The middle usually means a
strategy that is not clearly perceived to have any distinguishing characteristics. This
rule can vary with the number of competitors. For example, when there are only
two competitors, as in U.S. presidential elections, the middle becomes the
preferred strategic position.
An effective product-positioning strategy meets two criteria:
1) It uniquely distinguishes a company from the competition, and
2) It leads customers to expect slightly less service than a company can deliver. Firms
should not create expectations that exceed the service the firm can or will deliver.
Underpromise and then overdeliver is the key!
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1)
2)
3)
4)
5)
6)
7)
There must be effective interactions between R&D departments and other functional departments in implementing
different types of generic business strategies.
Conflicts between marketing, finance/accounting, R&D, and information systems departments cn be minimized with
clear policies and objectives.
There are at least three major R&D approaches for implementing strategies:
1) To be the first firm to market new technological products. This is a glamorous and exciting strategy but also a dangerous
one.
2) To be an innovative imitator of successful products, thus minimizing the risks and costs of start-up. This requires excellent
R&D personnel and an excellent marketing department.
3) To be a low-cost producer by mass-producing products similar to but less expensive than products recently introduced.
This strategy requires substantial investment in plant and equipment but fewer expenditures in R&D than the two
approaches above.
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Many firms wrestle with the decision to acquire R&D expertise from external firms or to develop R&D expertise
internally. The following guidelines can be used to help make this decision:
1) If the rate of technical progress is slow, the rate of market growth is moderate, and there are significant barriers to
possible new entrants, then in-house R&D is the preferred solution. The reason is that R&D, if successful, will result in a
temporary product or process monopoly that the company can exploit.
2) If technology is changing rapidly and the market is growing slowly, then a major effort in R&D may be very risky, because
it may lead to the development of an ultimately obsolete technology or one for which there is no market.
3) If technology is changing slowly but the market is growing quickly, there generally is not enough time for in-house
development. The prescribed approach is to obtain R&D expertise on an exclusive or nonexclusive basis from an outside
firm.
4) If both technical progress and market growth are fast, R&D expertise should be obtained through acquisition of a wellestablished firm in the industry.
Perhaps the most current trend in R&D management has been lifting the veil of secrecy whereby firms, even major
competitors, are joining forces to develop new products.
Collaboration is on the rise due to new competitive pressures, rising research costs, increasing regulatory issues, and
accelerated product development schedules.
Companies not only are working more closely with each other on R&D, but they are also turning to consortia at
universities for their R&D needs.
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